Auctions to be held under the Extended Collateral Term Repo Facility

In his Mansion House speech last night, Sir Mervyn King, the Governor of the Bank of England, announced that in the current turbulent period, the Bank of England will be commencing operations under the Extended Collateral Term Repo (ECTR) Facility.  Activation of this Facility, introduced in December 2011, is intended to mitigate prospective risks to financial stability arising from a market-wide shortage of sterling liquidity by lending to the banking system against the widest range of collateral.

The Bank intends to hold an ECTR auction at least monthly until further notice.  The first auction under the ECTR Facility will be held on 20 June 2012.  In its ECTR auctions, the Bank will offer sterling liquidity with a term of 6 months against collateral pre-positioned for use in the Bank’s Discount Window Facility (DWF).  The minimum bid rate in these auctions will be a spread to Bank Rate of 25 basis points.  All firms registered for access to the Bank’s DWF are eligible for ECTR auctions.  The size of ECTR auctions will be announced the day prior to each operation and will be subject to a minimum of £5 billion.

Property booms, stability and policy – speech by Paul Tucker

In the Alastair Ross Goobey Memorial Lecture given at the Investment Property Forum in London, Paul Tucker – the Bank’s Deputy Governor for Financial Stability and member of the Financial Policy Committee – identifies lessons from the commercial property boom and bust for regulation, and outlines some thoughts on the interactions between regulatory, central bank liquidity and monetary policies.

 

Reviewing developments in commercial property lending in the UK and abroad before and after the crisis, Paul Tucker observes that many economies experienced a lending boom that turned to a bust.  He highlights three lessons from this. 

 

First, the distinction sometimes made between safe commercial banks and risky investment banking can be misleading.  A highly levered commercial bank lending largely to highly-geared property investors can be risky.  Paul Tucker says that in response the rules of the game for finance are being overhauled for all types of banks.

Bank of England/GfK NOP Inflation Attitudes Survey

​This news release describes the results of the Bank of England’s latest quarterly survey of public attitudes to inflation, undertaken in May 2012.

 

Highlights from the survey

 

Question 1:  Asked to give the current rate of inflation, respondents gave a median answer of 4.7%, compared with 4.8% in February.

 

Question 2a:  Median expectations of the rate of inflation over the coming year were 3.7%, compared with 3.5% in February.

 

Question 2b:  Asked about expected inflation in the twelve months after that, respondents gave a median answer of 3.4%, compared with 2.9% in February.

 

Question 2c:  Asked about expectations of inflation in the longer term, say in five years time, respondents gave a median answer of 3.6%, compared with 3.2% in February.

Tails of the unexpected – paper by Andrew Haldane

In a paper given at “The Credit Crisis Five Years On: Unpacking the Crisis” conference held at the University of Edinburgh Business School, Andrew Haldane – Executive Director for Financial Stability and member of the Financial Policy Committee – argues that economic and financial systems are prone to tail events, as demonstrated during the financial crisis, that are not captured by traditional macro-economic and risk-pricing models.  In doing so, he draws a number of important lessons for economic and financial policymakers.  The paper is co-written with a Bank colleague, Benjamin Nelson.

 

Andrew Haldane explains that, for almost a century, the world of economics and finance has been dominated by a particular way of describing the distribution of possible real world outcomes, known as the normal distribution.  But more recently there has been mounting evidence of non-normality.  Drawing parallels with evidence from natural and social systems, Andrew Haldane explains that measures such as GDP and equity prices exhibit “fat‑tailed” distributions.  Catastrophe risk is often much greater than the normal distribution would imply. That can result in considerable under-pricing of catastrophe risk.

Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £325 billion

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.  The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £325 billion.

The minutes of the meeting will be published at 9.30am on Wednesday 20 June. 

Notes to Editors

The previous change in Bank Rate was a reduction of 0.5 percentage points to 0.5% on 5 March 2009.  A programme of asset purchases financed by the issuance of central bank reserves was initiated on 5 March 2009.  The previous change in the size of that programme was an increase of £50 billion to a total of £325 billion on 9 February 2012.

Andrew Bailey to be appointed to the interim Financial Policy Committee

The Government and the Bank of England today announced that Andrew Bailey will be appointed to the interim Financial Policy Committee (FPC) replacing Hector Sants, Chief Executive of the Financial Services Authority (FSA), who stands down in June.  Mr Bailey, who it has been announced takes up the position of Head of the Prudential Business Unit upon Mr Sants’s departure, will be a voting member of the interim FPC. 

 

Mr Bailey’s appointment, which will take effect at the June meeting of the interim FPC, will be on an interim basis until a Chief Executive of the Prudential Regulation Authority and Deputy Governor of the Bank of England for Prudential Regulation has been appointed and taken up their position.

History credits of England

England's crushing defeat by France, the dominant naval power, in naval engagements culminating in the 1690 Battle of Beachy Head, became the catalyst to England rebuilding itself as a global power. England had no choice but to build a powerful navy if it was to regain global power. No public funds were available, and the credit of William III's government was so low in London that it was impossible for it to borrow the £1,200,000 (at 8 per cent) that the government wanted.

Functions of the Bank credits of England

The Bank of England performs all the functions of a central bank. The most important of these is supposed to be maintaining price stability and supporting the economic policies of the British Government, thus promoting economic growth. There are two main areas which are tackled by the Bank to ensure it carries out these functions efficiently:^[26]

Financial stability credits of England

Maintaining financial stability involves protecting against threats to the whole financial system. Threats are detected by the Bank's surveillance and market intelligence functions. The threats are then dealt with through financial and other operations, both at home and abroad. In exceptional circumstances, the Bank may act as the lender of last resort by extending credit when no other institution will.

Asset Purchase Facility credits of England

The Bank has operated, since January 2009, an Asset Purchase Facility (APF) to buy "high-quality assets financed by the issue of Treasury bills and the DMO's cash management operations" and thereby improve liquidity in the credit markets.^[32] It has, since March 2009, also provided the mechanism by which the Bank's policy of quantitative easing (QE) is achieved, under the auspices of the MPC. Along with the managing the £200 billion of QE funds, the APF continues to operate its corporate facilities. Both are undertaken by a subsidiary company of the Bank of England, the Bank of England Asset Purchase Facility Fund Limited (BEAPFF).^[32]

Banknote issues credits of England

The Bank of England has issued banknotes since 1694. Notes were originally hand-written; although they were partially printed from 1725 onwards, cashiers still had to sign each note and make them payable to someone. Notes were fully printed from 1855. Until 1928 all notes were "White Notes", printed in black and with a blank reverse. In the 18th and 19th centuries White Notes were issued in £1 and £2 denominations. During the 20th century White Notes were issued in denominations between £5 and £1000.

The vault credits of England

The Bank of England is custodian to the official gold reserves of the United Kingdom and many other countries. The vault, which is situated beneath the City of London, covers a floor space greater than that of the second-tallest building in the City, Tower 42, and needs keys that are three feet long to open.^[38] The Bank of England is the fifteenth largest custodian of gold reserves, holding around 310 tonnes.^[39]

Creating a Single Customer View (SCV), across all business channels and brands has always been complex and challenging, but in the recession it has never been more important. Now major UK lenders have to create a Single Customer View to work within the requirements of the Financial Services Compensation Scheme.

Callcredit can provide a comprehensive database of group relationships, enabling you to make better cross sell and up sell decisions, spot early signs of debt stress and improve your management across the customer lifecycle.

The SCV has always been the ultimate customer management goal for complex, multi-channel lenders.

The structure of Callcredit's data bureau uniquely allows us to link all financial records with the correct individual upon receipt.  Therefore we can generate a single customer view of your customers that encompasses all their financial relationships both quickly and accurately.  We can also process your customers' 'unconsented' accounts and can return them to you, as part of your Single Customer View solution.

Benchmarking services

We work in association with process benchmarking ltd to provide unique high quality credit risk benchmarking services. 

In a constantly changing market, benchmarking enables our clients to continually monitor their risk management effectiveness against other organisations to ensure they are positioned where they want to be and ultimately help to improve performance.

We know that data only becomes valuable information for you if there is knowledge and expertise available to identify the insight required to drive commercial benefit for your organisation. Many organisations pride themselves on the vast amounts of data they hold on their customers without truly understanding the value it can bring.

Callcredit's team of expert consultants are ideally placed to assist you in this field, drawing on their time working in the credit industry utilising similar data assets. Applying the latest analytical tools and data mining techniques to various consumer datasets, Callcredit's Consultancy & Data Analytics team can assist you in driving tangible benefit from the data you hold. 

A number of professional services are available from the Consultancy team covering the entire credit lifecycle:

Whilst risk and affordability scorecards provide accurate assessments of the likelihood of repayment based upon an applicant's personal characteristics, they are often unable to cater fully for geographic differences.

This is particularly important in this recessionary period as unemployment is not only growing significantly but varies considerably by geographic regions. It has therefore never been more important to know the risk profile of where somebody lives in addition to their personal risk profile.

DecisionMetrics has constructed a credit risk geo-demographic system providing fifteen classifications reflecting levels of credit risk and indebtedness across the whole UK population.

Wouldn't it be useful to have information on your customers' assets to enable you to act quickly and develop strategies that help you manage any impending risk?

With issues such as rising personal debt and falling house prices, waiting for arrears to happen is not an option.

The Equity Indicator is a powerful solution based on the matchless combination of two proven industry information providers:

• Hometrack's market leading Automated Valuation Model (AVM) which can accurately assess values of individual properties; and

Examine and assess with confidence your customers' ability to service existing and proposed new credit with Callcredit's Affordability Suite.

A powerful tool in the responsible lending armoury, our Affordability Suite enables you to base your customer management decisions on a view of over-indebtedness rather than simply assessing your customer's history.

Unique to the marketplace, access to our income data will give you the complete picture of your customers.

For customers who have a high debt to income ratio we have developed a suite of indicators and scores:

If something happens to your client's profile that is likely to affect your view of their potential to pay, wouldn't it be better to know immediately rather than find out at the end of the month?

By enabling you to monitor events such as missed payments, significant total balance changes, new County Court Judgments (CCJs), bankruptcies and CIFAS filings on a daily basis, CallMonitor is an aid to responsible lending, helping you to protect your customers from over-indebtedness.

Gauge is a series of credit risk scores which provide you with a fast, objective and consistent measurement of the credit risk associated with each consumer, based on information contained in their credit report.

This enables you to better understand the likely future payment performance of your customers or prospects allowing you to make more informed decisions. Gauge can be integrated within automated and manual credit decision processes. It can also be used to support consumer credit application decisions and review existing credit accounts for overdraft limit management, credit card limit changes, further product credit granting, collections decisions and to support marketing activity.